Welcome to the Ultimate Guide to Home Solar Panels in California
Solar Power in California
When it comes to dollars saved for every dollar spent, California is the best place in the country to go solar. The state has just the right mix of factors that make solar work for the average home: lots of sun, high electricity prices, great support from state government, and plenty of options for solar panel financing.
The good news doesn't stop there. The most populated areas of the state enjoy a temperate climate, meaning Californians don't use a ton of energy to heat and cool their homes. That means you can install a smaller solar panel system, which will generate more electricity than it would in a cloudier place. You probably have neighbors and friends who have gone solar and are already saving hundreds of dollars per year on their electric bill. You can save money with solar power in California, too!
If you go solar in California in 2020, you'll be signed up for "Net Energy Metering 2.0", aka NEM 2.0, a 20-year contract from your utility company that defines how much they'll pay you for your excess solar energy, and how much you'll have to pay every month to maintain a 2-way connection. We get more in-depth on what NEM 2.0 means in our section on net metering, below.
California Solar Report Card
For 2020, California earns an A for its solar incentives and policy! The state may not have some of the rebates and tax credits that some other states do, but it doesn't need them, either! Electricity prices are high in California, and solar panels can wipe out most of your bill and pay off their cost in far less than 10 years.
Generate an accurate online solar estimate for your home
Every home is unique. Find out how much you can save with solar in California
Solar power installation cost, energy production and solar savings change from home to home. Therefore, generic information about solar panel installation cost and solar savings is of little use to homeowners considering solar. This is why we provide the estimator above because it takes all of the characteristics of your roof and location into account to provide you with a very accurate and personalized solar cost an savings estimate that is likely to be 95+% accurate.Interested in a home solar system? Get Started
Are Solar Panels Worth it in California?Compare costs
The cost of NOT installing solar in California
The average homeowner in California is paying about $103 per month, or $1,236 per year for electricity right now. That money goes straight from your pocket to the utility company.
If you're going to be living in California for the next couple decades, you'll be paying a TON for electricity from the utility company. Seriously. California has the nation's 7th-highest electricity prices, and the cost has been growing faster here than almost anywhere else.
Now the utilities want everyone to shift to a new kind of billing called Time of Use (TOU), which costs you more when you use electricity during peak times like 3-8 pm. That means when you get home from work and turn on the oven, TV, air conditioner, etc, you are getting billed a TON! Adding solar panels to your home can ensure you're producing enough energy to offset your usage, and selling exta energy back to the grid to get credit you can use when the sun goes down.
The cost of your electricity over the next 25 years without solar:
*assumes average cost/kWh increase of 3.5% annually. Current cost is $0.19/kWh according to EIA data.
Don't believe us? Here's how it works:
- $103 per month average bill * 12 months = $1,236
- With average annual increases of 3.5%, year 2 cost is $1,279, year 3 is $1,323...
- By 2044, we project your annual electric cost to be $2,821
- Add up all 25 years' cost and you get $48,142
The savings possible with solar in California
Adding solar panels to your California home immediately begins to pay itself back. Under new rules called "Net Energy Metering 2.0," you earn credit for every kilowatt-hour your solar panels produce, whether you use it to power your home or send it to the grid. The credit you earn is applied to your bill and offsets your usage over the course of a year.
You'll still get a monthly minimum bill, for the connection fee and other small charges. At the end of each year, you get what's called a "true-up" statement, where the utility company totals up the electricity you used from the grid and the electricity your solar panels generated. If your panels generated less than you used, you pay the difference. If they generated more than you used, the utilty company will cut you a check with payment for the excess.
The cost of your electricity over the next 25 years with solar:
*assumes average cost/kWh increase of 3.5% annually. Current cost is $0.19/kWh according to EIA data.
Here's how you save with solar power:
- The average 5.2-kW system costs about $16,640 to install
- Then the savings begin. First, you earn a $4,326 Federal Solar Tax Credit
- Over 25 years, your California solar panels will save you an estimated $57,538 on your electric bills
- The total net savings from solar in California (bill savings and incentives minus up-front cost), is $45,224
Generate an accurate online solar estimate for your home
Solar Loans in California
Should you consider a solar loan in California?
Rather than spend $16,640 of your savings to install solar, it might be wise to choose a solar loan or Home Equity Line of Credit (HELOC). Banks now recognize the savings potential of solar and offer favorable terms to help you get solar now and pay over time as you save.
Should you get a solar loan in California? Our advice is "yes!" The reason solar loans work well in California is they can enable you to get a system installed with no money down, while paying off the cost over time with a monthly payment that is lower than your current electric bill.
You'll earn all the benefits of owning the solar panels, like California's solar power property tax exemption and the federal solar tax credit. Our estimates show that you'll pay off the loan in 15 years, saving more money every year as the utility company raises rates. After the loan is paid off, your solar panels will be under warranty to keep making electricity for at least 10 more years, and your savings will skyrocket!
25-year energy costs
|Before solar loan:||$48,142|
|After solar loan:||$9,190|
|Solar loan savings:||$38,952|
Here's how you save with a solar loan:
- The average 5.2-kW system costs about $16,640 to install. That's how big your loan should be.
- Your monthly electric bill savings will be about $131, but your loan payments will be $127, meaning you'll save $4 per month with solar.
- Then at the end of the first year, you earn a $4,326 Federal Solar Tax Credit, leaving you $4,380 ahead!
- Your solar loan will be paid off after year 15, and then the real savings start! The total net savings after 25 years from an average solar loan in California (bill savings and incentives minus loan cost), is $38,952.
Generate an accurate online solar estimate for your home
California Solar Incentives and Policy
Use the buttons below to learn about the solar incentives available to homeowners in California, as well as the laws and regulations your state government has put in place to help you go solar.
California Solar Policy Information
Ever wonder why solar seems to be everywhere in some states, but not in others? We did too.
State legislatures and public utilities commissions can enact rules to make solar power accessible for everyone. Favorable rules explain why some of the cloudiest states—New York, New Jersey, and Connecticut, are doing so well with solar, and yet some of those with the most natural solar resources—like Alabama, Mississippi, and Georgia—are doing so poorly.
Below is important information about the public policy, rules, and economic reasons that affect your ability to go solar here in California:
California's Renewable Portfolio Standard100% by 2045
California has one heck of a Renewables Portfolio Standard (“RPS”); 100% of electricity production must come from "carbon-free" sources of energy by 2045. If not, the utility companies get slapped with mighty high fees. Only Hawaii has a better goal, seeking 100% of its electricity from only solar and wind by 2045. But Hawaii's population is just 1.5 million people, and California's is nearly 27 times that at 40 million.
What we're saying is, getting electricity for 40 million people from carbon-free sources is a BIG deal.
Recently, the state has seen a victory for solar in the fight to keep net metering in place for new solar owners. Expect it to stay that way, at least for a couple more years, while the state continues to refine its approach as solar takes a larger and larger chunk of total electricity generation.
California's Solar carve-out and SRECsNone
California’s strong RPS and geographic location have been a boon to residential solar. But if the RPS contained specific carve-outs for clean and efficient technologies like solar panels, or mandates for the environmentally necessary increases in distributed generation, you’d see even stronger incentives for residential solar power.
California Electricity Prices$0.19/kWh
Californians currently pay an average of 19 cents/kWh for electricity – one of the ten highest rates in the nation. And place like San Francisco and San Diego pay $.25 or $.30 per kWh, or more. That's INSANE!
We know you hate your electric bill. Really, we do. So let's do something about it. The reason your high electricity cost gets an "A" here is because it means you can save more money with solar! And as you’ve seen in the past few years, energy costs will continue to rise. In the nation overall, prices go up about 3.5% per year, but in some places in California, the utility companies have plans to increase retail prices by as much as 8% per year.
But you're not worried about that, because you're switching to solar, right? You're out there getting mulitple quotes for that home solar panel installation you're planning. You're ready to join the ranks of super smart Californians who know solar can save them thousands of dollars and add value to their homes. Good for you!
California Net MeteringNEM 2.0 - Statewide
Net metering (aka “Net Energy Metering," or NEM for short) is a term that means what we described above: every kWh you send to the grid reduces your electric bill by 1 kWh. California had a great NEM policy in the early 2000s, and solar boomed all around the state.
Then the percentage of energy coming from solar started to become significant, and the state Public Utilities Commission, under pressure from utility companies, decided it was time for a new NEM standard. They called in NEM 2.0, and despite what we just wrote about pressure from utility companies, it’s actually still pretty great for solar owners.
Here’s how NEM 2.0 works:
- A homeowner buys a solar panel system and installs it on their roof.
- The utility company sets them up with an “interconnection agreement,” for which they charge a small fee ($75-$150, depending on where you live). That allows the homeowner to get their system hooked up to the grid to start earning them credit
- The homeowner also signs up for Time-of-Use billing, which means they pay more for electricity when lots of people are using it (peak time) and less when people aren’t using as much (off-peak).
- The homeowner also gets bigger credit for solar energy sent to the grid at peak times, and lower credit for energy sent at off-peak times.
- The resulting kWh are “netted” monthly, equaling usage minus production. The homeowner also has to pay a minimum monthly fee (the same as non-solar owners), and, here’s the kicker, a tiny amount for each solar kWh sent to the grid. That tiny amount is called a “non-bypassable charge,” and it’s about 2 cents per kWh.
- At the end of each month, the customer pays the bill for the monthly charge, and non-bypassable charges.
- At the end of the year, all the kWh that were sent to the grid are subtracted from all the kWh that the customer used, and a final bill called the “true-up” is due. If your solar system is sized to meet your usage and you hit that number, your true-up bill could be $0. If you used more than you sent to the grid, you have to pay for the balance. If your panels made more than you used all year, you get about 3-4 cents per kWh for the extra.
Whew, that sounds complicated! Well, you don’t know the half of it. On top of what we just told you, some utility companies offer different NEM-like billing arrangements that still meet the state’s requirements.
If you’re one of the millions of homeowners served by SDG&E, SCE or PG&E, your NEM arrangement will probably be much like we described above. If, on the other hand, you’re serviced by a municipal utility like SMUD or LADWP, you might have a very different experience.
Fortunately, your friendly local solar installer has dealt with NEM 2.0 for a while now, and they are the experts in helping you design a system that will maximize your savings. Connect with local solar experts near you to find out more about how you can save.
California Interconnection RulesSimplified for Homeowners
In California, small renewables are exempt from paying the high costs associated with the interconnection studies, distribution system modifications or application review fees that we've seen be a problem in other states.
Only two areas remain utility companies aren't adequately restrained from overcharging you for interconnection: requiring a redundant external disconnect switch; and requiring you to carry separate liability insurance. While such safeguards make sense for very large energy systems, both of them are just a waste of money for small residential setups like yours. Whether or not you'll be required to pay for either depends on your utility company and its policies. One of our local partners can tell you for sure when you get one of your free quotes.
California Solar Incentives
Next to high electricity prices and net metering, solar incentives have traditionally been the most important factor for whether home solar power makes financial sense in a state. In the past, some states with otherwise lousy policy had tremendous incentives that drove down the up-front cost of going solar so much that homeowners could save oodles of money even without net metering or a good RPS.
These days, the big incentive most people can get is the Federal Solar Tax Credit that earns you 26% of your total system costs back after just 1 year. State incentives play less of a role than in the past, but some really good ones are still out there, ready to help homeowners go solar and save money before you know it.
Let's see how California measures up:
The availability of state solar incentives for residential solar systems was sourced from the Database of State Incentives for Renewables and Efficiency, utility company websites, and the state public utility commission.
California Solar RebatesVaries by utility
California's solar power rebate program used to be extensive. The state enacted the California Solar Initiative (“CSI”) to encourage the development of solar power. The Initiative’s goal was to help create 3,000MW of new solar power by 2017, and they succeeded.
The original rebates available through the CSI were exhausted in 2014, but the mission lives on in the low-income SASH and MASH programs. Read more about the California Solar Initiative below.
Unfortunately for most residents of the state, the big utilities have long since closed their rebate programs. A couple municipal utilities still offer rebates to customers who install solar. Check the table below to see if there is still funding in your area:
2020 solar rebates for California municipal utilities
|Utility Company||Rebate Amount||Notes|
|PG&E, SCE, & SDGE (SASH program)||$3,000/kW||Only for low-income applicants. Read more below|
|San Francisco||$200 - $2,550 per kW||Varies by system size, location, & applicant income|
|SMUD||$300 per installation||Handled by installer|
|Ukiah Utilities||Currently Revising||tbd|
We realize these charts and tables might be a little confusing. That's why we strongly recommend getting custom quotes for solar including specific rebate amounts tailored to you, your budget and your utility. We’ll connect you with a local installer that can walk you through the process and even apply for rebates for you as part of installation. In many areas, you can go solar for $0 down!
California Solar Tax CreditsNone
Solar power in California used to qualify for a tax credit. Sadly, the solar tax credit went the way of the Dodo Bird in 2005. To be fair, the tax credits were probably allowed to expire because of the implementation of the huge CSI program, and all those solar rebates we just talked about. But we’d gladly take a tax credit and a rebate (nudge, nudge).
Property Tax Exemption100%
If California isn’t giving you a tax credit anymore, it’s at least giving you some tax exemptions, right? Well... yes!
Until the end of 2024, new solar installations will be subject to no additional property taxes, based on their assesed value. That's a pretty good bargain, since the best data we have shows a home value increase of about 70% of costs.
For a typical 5-kW system in California, that's nearly $11,000 in home value that the assessors can't touch!
Sales Tax ExemptionNone
One of the simplest ways for the California state legislature to encourage small scale clean energy adoption is to declare solar panel equipment exempt from state sales taxes as many other progressive states have done. Sadly, there is no such declaration.
Low-income Solar ProgramsSingle & Multi-Family Programs
California is at the vanguard of states that offer programs to help low-income families go solar. If you live in California and have electricity service through one of the state's big 3 electric utilities, you could be eligible for a 100% free solar system that can provide call the power you need. Let's dive in to how that works, and who qualifies:
The California Solar Initiative Single-Family Affordable Solar Housing Program (SASH)
The SASH program was the first of its kind in the United States, and to this day, it remains the single most valuable low-income solar program for homeowners. The program is administered by Grid Alternatives, which is an excellent non-profit organization that both helps low-income families go solar and teaches people from all walks of life how to work in the solar industry.
Through Grid Alternatives, low-income homeowners can participate in the SASH program and receive additional funding to completely cover the cost they would have paid for a solar system. Here are the details that qualify a homeowner for the SASH Program:
- Own and live in their home
- Be customers of Pacific Gas & Electric (PG&E), Southern California Edison (SCE), or San Diego Gas & Electric (SDG&E)
- Have a household income of 80% or below the median income for their area
- Live in a home defined as “affordable housing” by California Public Utilities Code 2852
That last one might be a bit of a restriction. Here's what Code 2852 says:
An individual residence sold at an affordable housing cost to a lower income household that is subject to a resale restriction or equity sharing agreement, for which the homeowner does not receive a greater share of equity than described in paragraph (2) of subdivision (c) of Section 65915 of the Government Code , with a public entity or nonprofit housing provider organized under Section 501(c)(3) of the Internal Revenue Code that has as its stated purpose in its articles of incorporation on file with the office of the Secretary of State to provide affordable housing to lower income households.
If that describes your situation, connect with GRID Alternatives to learn about your options.
California's Multi-Family Affordable Solar Housing Program (MASH)
The MASH program differs from the SASH program in that it helps landlords who offer affordable housing to install solar panels. Those panels can be set up to produce electricity that both offsets common-area electricity needs OR benefits the tenants, and there are additional amounts available for systems that offer more than 50% of their electricity to reduce tenant electricity bills.
Unfortunately, all funds for the current MASH program are subscribed, meaning there's nothing left until the next round of funding comes through. For more information, check out the MASH program page at Go Solar California.
If you're a policymaker in any state in the union and you'd like to know more about how the California programs work, please check out our article about low-income programs that provide affordable solar in California.
The Final Word on California Solar Panel Incentives and Policy
California is the ideal place to put solar panels on your home. Electricity is more expensive here than almost anywhere else in the country, and the sun shines bright for most of the year, meaning you recoup your investment quickly. And you can be sure you’ll get treated fairly, because there’s ample support from the state government to protect homeowners from shady utility company practices.
All-in-all, despite some necessary changes California has made in the past few years to its solar incentives and net metering system, we recommend going solar in California 100%.